Content Attributes
Financial key metrics are crucial for every business’s success. It shows the measurable value that displays the progress of a business. Financial metrics enable you to check if you have achieved financial goals in a particular time frame or not. Tracking irrelevant financial metrics can distract you from things that actually matter. So, it is essential to choose the right ones to perceive.
The following are the most important financial metrics suggested by industry experts for growing businesses:
1. Sally Rong, CEO, Rellery
One important metric to always keep your eye on is your budget for lead generation. Whether this includes outreach, gated content, or any other methods, you need to be sure that you’re experiencing a successful ROI. An outpouring of leads can be impressive, but if they can’t be verified and quickly moved down the sales pipeline, then you may need to implement other strategies.
2. Lily Ugbaja, Founder, Dollar Creed
“One of the top financial metrics every business must keep an eye on is the ‘Cost of Customer Acquisition.’ This refers to the cost spent on acquiring customers (i.e., marketing expenses) per every customer acquired.
A reasonably good ratio to aim for is 3:1. That means the value of every customer gotten should be the 3 times more than the cost of acquisition. If the ratio is 2:1 or even 1:1, then your CAC (customer acquisition cost) is definitely too high.
This metric is very important as it helps a business calculate the value and importance of a customer compared to the costs spent on marketing and research.”
3. Edwin Rubio, VP of Sales for VaporEmpire
Customer Acquisition Costs
“This metric can tell you how much you’re spending on acquiring a new customer. It can be a great way to measure how healthy your marketing spending is in relation to your company’s growth. Customer acquisition costs can demonstrate that your marketing and advertising investments are worthwhile. If not, it may be worth it to tighten your budget for a period of time to see if this has an effect on customer growth.”
Customer Churn
“This metric is the number of customers who cancel your service or stop purchasing your products over a set period of time. Reducing churn is key for any business’s survival. You might want to keep a close eye on this metric to help you take organized action before things get too out of control.”
Profit Margin
“Profit margin is essentially the amount of revenue your company earns after factoring in all of the expenses. As one would expect, this can be a rough indicator of how effectively your company is selling its product or services. Your profit margin can be low if costs are higher than expected or if you’re pricing isn’t what it should be.”
4. Eropa Stein – Founder & CEO at Hyre
The most important financial stats I look at is the monthly usage of our product, cost of acquisition, and overall sales. My product is Hyre a SaaS scheduling and staffing platform for shift managers. I am always on the lookout for ways to add value, reduce churn, and find new channels to gain clients. Typically, once a new client is onboarded, they become long-term users, but COVID-19 has put a gigantic strain on hotel, catering, and event venue clients. Last year, we pivoted to long-term care homes and found channels with a lower cost of acquisition.
Bottom line: When COVID-19 hit, the cost of acquisition for healthcare clients dropped while the CAC for hotel, catering, and event venue clients skyrocketed.
Insider tip: Stay in touch with where the market demand is so that your cost of acquisition is as low as possible.
5. Swati Chalumuri – Founder, Hearmefolks
The cost of acquiring new customers vs. marketing
Business growth and customer numbers or rate of new product absorption go hand in hand. This is one of the major reasons why marketing is central to any growth-related strategies. This should, however, not be done blindly- the cost of attracting new business should follow a tried and tested curve.
That is, at the budding stages, the cost of acquisitions should be high compared to the number of new customers or the income from new businesses. With time though, these expenses, such as marketing, should lower compared to the revenue associated with the new business brought in. It’s only then that you can say that your growth efforts are bearing fruit.
Conclusion
While the opinions shared above will help you understand why and which financial metrics are helpful for you, another important thing you should take care of is the accuracy of your financial information. If your in-house accountants are too busy handling multiple accounting functions that they often make minor mistakes that can lead to costly penalties, or if you have a shortage of resources for accounts and financial management, you may consider getting virtual accounting services.
Companies that provide such services ensure your financial data is accurate and organized, further helping you perform different financial metrics correctly, gain optimum outcomes, and make better financial decisions.